In our November 1, post “One Consequence of Becoming a SEF Member - Increased Recordkeeping Requirements” we sought to raise awareness regarding increased recordkeeping requirements for SEF members under CFTC Rule 1.35(a).
CFTC Rule 1.35(a) generally requires “members” of a SEF (or an exchange) to maintain oral records (i.e., recorded line requirements), but it provides exemptions from maintaining oral records to numerous entities, including CPOs and entities not registered and not required to be registered. Notably absent from the exempted entities are stand alone (i.e., non-CPO) registered CTAs.
In response to a December 10, 2013 letter from SIFMA’s Asset Management Group and the Managed Funds Association, the CFTC Division of Swap Dealer and Intermediary Oversight and Division Market Oversight (the “Divisions”) issued CFTC Letter 13-77 on December 20, 2013, providing time limited no-action relief to CTAs from the oral recordkeeping requirements of CFTC Rule 1.35(a).
The Divisions will not recommend that the CFTC take enforcement action against a CTA that is a member of a SEF for failure to comply with the requirement to record oral communications under Regulation 1.35(a), prior to May 1, 2014.
CFTC Letter 13-77 is available here.